According to the China Banking and Insurance Regulatory Commission, China has hit its years-long structural deleveraging campaign goals but the country still has to continue efforts in reducing risks caused by excessive leverage in the system, reports Caixin.
China’s macro-leverage ratio, or the ratio of total debt to gross domestic product, has stabilized since last year, reversing the trend of previous years in which the ratio climbed by an average of more than 10 percentage points, said the CBIRC in a statement.
Wang Zhaoxing, vice chairman of the country’s top banking and insurance regulator, highlighted that even though much has been done, there are is still work to do.
“The leverage rate is stable and has been steadily coming down under this stable foundation,” the CBIRC vice chairman said. And yet “the job of lowering leverage by enterprises and local governments still needs to continue. … This is only a phase in the progress. The hidden dangers of many risks have not been completely eliminated. Previous measures and results for resolving financial risks need to be consolidated.”
He added that holding down nonperforming assets, including bad bank loans, should remain a focus and could become increasingly difficult as the country’s faces growing economic challenges. Chinese commercial lenders had RMB 2.03 trillion ($303 billion) of nonperforming loans at the end of 2018, while loans of concern totaled RMB 3.5 trillion, according to CBIRC data. The nonperforming loan ratio stood at 1.83% at the end of the fourth quarter, down 0.04 percentage point from the end of the previous quarter.